INSOLVENCY AND BANKRUPTCY MOOT COMPETITION 2017

28-29 October, New Delhi, INDIA

Organized by: -
Centre for Transnational Commercial Law
National Law University, Delhi. INDIA
Supported by: -
The Insolvency and Bankruptcy Board of India (IBBI)
United Nations Commission on International Trade Law - Regional
Centre for Asia and the Pacific (UNCITRAL - RCAP)
In Association with: -
INSOL India and Society of Insolvency Practitioners (SIPI)
http://nludelhi.ac.in/up-event1.aspx?id=3055

Moot Proposition1

New Age Technology Limited (New Age) is the fourth largest manufacturer of solar
panels in the world and the largest in India. New Age has three plants, one located in in
the State of Gujarat and the other two in Karnataka. The shares of New Age are listed at
Bombay Stock Exchange and National Stock Exchange. New Age has raised an amount of
Rs. 10 crore in the year 2015 from issuing Masala Bonds with maturity date of July 2018.
The largest maturity amount is owed to PEG Developers Ltd, a London based

1 For
the purposes of this Moot Problem, it is assumed that India has adopted the UNCITRAL
Model Law on Cross-Border Insolvency 1999

Insolvency and Bankruptcy Moot Competition, NLU Delhi, 28-29 October 2017 1 | Page
Infrastructure Company. The FCCBs issued by New Age are listed on New York Stock
Exchange. The Registered Office of New Age is in Delhi. The corporate office of New Age
is located in Mumbai. There is one sales office in Rajasthan and another in Hyderabad.
Hyderabad office is on lease from Mr. R.S. Reddy. The Rajasthan office is self-owned
property located in a commercial building in Jaipur. The office space is shared with a
travel agency. The company has a guesthouse in Hyderabad, which was taken on lease
for three years in 2014. The lease can be extended by another three years at the option
of the lessor. Between the two plants and its various employees, New Age employs over
3000 employees. New Age also owns a property “New Age House” in Jaipur, which has
been given on lease to People’s Bank, Jaipur Branch under a registered lease deed dated
06.01.2011. Lease rental of Rs. 15,06,900/- per month is payable to New Age. The
company owns six luxury cars, including a Mercedes Benz, BMW and Audi, for use by its
Managing Director, CEO and CFO and other senior executives. The company owns an
apartment in Juhu, Mumbai, which is occupied by the managing director of the company
who is also the main promoter. New Age also owns a parcel of land in Raipur in
Chhattisgarh.

In 2015, the promoters of New Age diversified into hotel and real estate business. They
set up a company, Radha Hospitality Private Limited (RHPL) that bought an operational
5-star hotel in Jaipur. An international hotel operating company, Seven Points, manages
the Jaipur hotel. New Age entered into a JV with RHPL to develop a hotel on Raipur land
(owned by New age) to be operated by Seven Points. The JV development agreement
requires that RHPL will construct the hotel and commercial tower on the land by
contributing 50% cost while New Age will pay for the balance (in kind and cash). The
Contribution in kind was by way of transfer of the Raipur piece of land owned by New
Age to the JV and the cash contribution was approximately Rs. 65 crore. As New Age
received large advance from its US clients against orders, the company paid nearly 90%
of its obligations towards construction amount of Rs. 65 crore over a short period of
time. The balance was to be paid at the time of completion of the project. The JV requires

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New Age will receive revenue from commercial tower and RHPL from the hotel, after
meeting operational expense and management fee. The hotel is scheduled to commence
in March 2018 and New Age expects good returns.

New Age obtained financial assistance from a consortium of banks in the year 2008 at
the time of the setting up of the Gujarat plant. The company later borrowed further from
these banks in the year 2011 for setting up the Karnataka plants. A total term loan of Rs.
2195 crore was borrowed from three banks – Indo Bank, RST Bank and People’s Bank.
The working capital assistance of Rs. 195 crore was obtained from Bank of North India.
The company owns the lands on which the plants are built. While the term loan lenders
have first charge on the land and building of New Age and second charge on plant and
machinery, the working capital lender has first charge on plant and machinery and
second charge on land and building. The principal amount and outstanding dues of the
lenders of New Age are as detailed below:-
Particulars Principal Amount (In Rs. Outstanding as on
crore) 31.12.2016 (In Rs. crore)
INDO BANK 1000 1650
RST BANK 500 650
PEOPLES BANK 500 790
BANK OF NORTH INDIA 195 279

In the year 2016, whilst diversifying into the hospitality and real estate business, the
promoters also acquired, Ten Hospitality Services Pvt. Ltd (THSPL), a Singapore based
company, which owns a 5 Star hotel, The Davisson Continental in Singapore. In January
2017, THSPL raised capital through a private equity fund, LAVCA Capital Advisors
(LAVCA) for its re-development and expansion needs to the tune of USD 50 million. The
investment came partly in cash and partly as a loan against which THSPL created
security interest in favour of LAVCA’s sister company AFB Investment Pte, based in
Mauritius and created First charge by way of equitable mortgage on immovable

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properties of the Davisson Continental consisting of land and building of the hotel.
THSPL is required to repay the entire funding within a period of 3 years i.e. by
30.07.2018.

New Age has many suppliers of raw material. Two main suppliers are based out of China
and Taiwan. New Age has many clients but 85% of its production is captive with two
major clients - Dan Morris Energy Inc. (Morris), a Delaware company, and Texas Power
International (TPI), a company incorporated in Houston. Both the US based companies
operating major solar power plants around the world, including in India. New Age has
large orders from these two clients that will keep the plants busy for at least four years
operating on full capacity.

New Age has been servicing its debts regularly and has excellent relations with the
bankers. Its payments to suppliers are also regular.

On 15 September 2016, Morris filed for a chapter 11 proceeding under the US

Bankruptcy Code due to the stress caused by shutting down of its two plants in Muhaba
in North Africa due to social unrest in the country following a military coup. At the same
time, the holding company of TPI faced a major legal action from the US government for
bribing government officials in one of the South East Asian countries in return of
permission to set by a power plant in that country. Tremors were felt in TPI as many of
its contracts in that country were also put under scrutiny.

On 18 September Morris asked New Age to put some of its orders on hold. Morris
conveyed inability to pay the next tranche of purchase money due on 15 October 2016.
But it did not cancel the orders as it was hoping for some relief in chapter 11 proceedings.
Around the same time TPI wrote to New Age expressed inability to take delivery of solar
panels already ready for delivery for which payment had been made as it was blacklisted
in the country where they were to deliver. They were facing prosecution both in US and

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that country in South East Asia.

The next instalment of interest payable by New Age to term loan lenders fell due on 31st
October 2016 which New Age paid. The working capital lender was to be paid its next
instalment of interest on 31st December 2016. Around 4th November New Age paid the
balance amount of 10% to RHPL for completing construction works. The company did
not have any cash to service the instalment of Rs. 35 lakh due on 31st December 2016.
On 4th December 2016 the Board of Directors of New Age passed a resolution to sell the
Mumbai house to its managing director for Rs. 5 crore to raise funds to pay the next
installment. An advance of Rs. 55 lakh was received.

On 16th December New Age received a copy of an order from their lawyer in Bangalore
informing that the High Court of Karnataka had rejected their appeal against an order of
attachment passed by Customs Department pursuant to an order passed by them for
concealment of real value of plant imported from France in 2011 to avoid payment of
duty of Rs. 45 lakh depriving the government of revenue. That amount together with
penalty now worked out to Rs. 95 lakh. The High Court had allowed Customs
Department to attach the amount of Rs. 55 lakh lying in New Age bank account in
Mumbai. Mumbai account had only Rs. 14 lakh left. There was a Rs. 32 lakh in another
account. It could have paid the salaries and other bills or the bank. It decided to default
to banks.

On default, Bank of North India at once informed the other banks. On 4th March 2017,
RST Bank filed an application before the NCLT under the Insolvency and Bankruptcy
Code, 2016 (IBC) and proposed Mr. S. Mahesh , its empanelled lawyer as interim
resolution professional.
(Please identify the key issues at this stage)

The Application was listed for admission hearing before the NCLT on 17th March.2017,

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wherein the Corporate Debtor raised objections to the maintainability of the Application
before NCLT on various grounds. The Bench whilst recording the objections raised in
detail by a speaking order listed the application for admission hearing on 5th April 2017.

On 5th.April 2017, NCLT admitted the application whilst declaring Moratorium and
referred the appointment of an IRP to the Insolvency and Bankruptcy Board of India
(IBBI) for recommendation. IBBI recommended and confirmed Mr. Amit Thakur as
Interim Resolution Professional to carry the functions as mentioned under the IBC 2016.

New Age filed an appeal against the order of NCLT and IBBI recommendation.

(Please identify the key issues at this stage)

Upon appointment, Mr. Amit Thakur (IRP) visited the plant to take possession of New
Age’s assets. He was not allowed to enter the unit of New Age as the local political leaders
in support with the union workers led an agitation against Mr Amit Thakur to prevent
him from taking possession. Mr. Amit Thakur took appropriate steps and took
possession of the unit and appointed XYL Security services for preserving the unit of New
Age.
(Please identify the key issues at this stage)

On 06th March 2017, the electricity supplier GSES issued a demand notice for Rs. 85 lakhs
towards the dues of the electricity for the past 9 months to be paid within 10 days failing
which electricity will be disconnected with immediate effect.

On 08th March .2017, one of the suppliers of New Age, JSEW LTD who regularly supplies
EVA Film for manufacturing of the solar panels refused to supply EVA Film till the time
New Age clear its past dues and agreed to pay future dues as and when payable against
future supplies.

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On 09th March.2017, IRP to run the company as going concern wrote to People’s Bank to
deposit the lease rental in terms of the lease from April 2015 to February 2017
amounting to Rs. 79,41,026/- with the company, to which People’s Bank refused and
informed the IRP that the Bank has been adjusting the said lease rental towards its dues.

(Please identify the key issues at this stage)

Pursuant to the public announcement, the IRP received claims from all the other lenders
Indo Bank, RST Bank and People’s Bank. IRP also received claims from various
operational creditors and statutory authorities including the Customs & Excise
department. Accordingly, the Resolution Professional segregated the claims of the
financial institutions, operational creditors, statutory authorities and the public
depositors (Singapore).

During the scrutiny, the IRP observed that Marvel Organics Ltd one of the financial
creditor of New Age filed its claim but failed to file any documents in support to
substantiate its claim. Marvel Organics Ltd filed a claim of Rs. 136 crore. Marvel Organics
Ltd provided transformers to the tune of Rs. 20 Crore to New Age, which it claimed,
remained unpaid by New Age. Marvel did not file documents to support how its 20 crore
had escalated to 136 crore. IRP added the claim of Marvel to the list and invited it to the
committee of creditors.

(Please identify the key issues at this stage)

On 08th March 2017 IRP appointed M/s. KGB Valuers and M/s AKP Valuers being
registered valuers to determine the liquidation value of New Age. However, during the
valuation it was found that M/s AKP valuers were a related party to New Age.

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In the year 2012, New Age had for its working capital needs invited public deposits.
However, due to the financial crunch New Age could not service the interest to the public
depositors and various public depositors filed their claim before the IRP. The IRP
however rejected the claims of the public depositors on the ground that they do not fall
within the purview of operational creditor. The aggrieved public depositors approached
NCLT. However, NCLT vide its order dated 22th March 2017 dismissed the application
of the public depositors.

The public depositors aggrieved with the order of NCLT filed an appeal before the
NCLAT.

The NCLAT vide its order dated 20.02.2017 directed that public depositors may file its
claim before the IRP and in case, Resolution professional or the Tribunal do not accept
the claim on the ground that they are not operational creditor, the public depositor to
raise the question before the Tribunal.

Pursuant to the above, public depositors re-filed their claim before the Interim
Resolution Professional which was again rejected on the ground that their claim does
not fall under the definition of operational creditor. Aggrieved by the said order, the
public depositors approached NCLT in terms of the order passed by NCLAT.

(Please identify the key issues at this stage)

In the meantime, RST Bank challenged the claim filed by People’s Bank and Marvel on
the ground that the claim filed by People’s Bank is inflated.

In order to take possession of the flat of New Age in Mumbai, the IRP wrote to the
Director for taking possession who neither replied nor handed over the possession of
the flat. IRP accordingly filed an application before NCLT seeking appropriate orders for

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taking possession of the Mumbai flat.

(Please identify the key issues at this stage)

As one of the largest supplier of raw material to New Age was Xi Mao, a Chinese company,
upon coming to know that New Age is under CIRP refused to supply raw material till the
time past dues of 10 crores are cleared by New Age and future payments are regularized.

Thereafter the IRP verified the claims received and prepared a list containing the names
of creditors along with the amount claimed by them.

LENDER CLAIM FILED (IN CRORE) Rs.

INDO BANK 1650
RST BANK 650
PEOPLES BANK 790
BANK OF NORTH INDIA 279
MARVEL ORGANICS LTD 136
JSEW LTD 20
GSES 1.20
PUBLIC DEPOSITORS 45
CUSTOMS & EXCISE 2
EPF DUES 12
XI MAO 15

On 22th March, 2017, IRP constituted the Committee of Creditors (COC). As RHPL was
not part of the creditors committee, RHPL filed an application before NCLT seeking
representation, participation and voting right in the creditors committee.

(Please identify the key issues at this stage)

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On 29th March 2017, the first meeting of COC was scheduled, wherein the IRP Mr. Thakur
proposed to the COC that IRP be continued as RP. However, after much deliberation, the
COC resolved to appoint Mr. Dhivesh Sharma as the Resolution Professional. During the
meeting, People’s Bank raised concern about sale of Mumbai Flat to the managing
director of New Age in the month of December 2016 and the sale proceeds being
siphoned off.

COC filed application before NCLT seeking appointment of Mr. Dhivesh Sharma as the
Resolution Professional and NCLT vide its order dated 07th April 2017 recommended the
name of Mr. Dhivesh Sharma as the Resolution Professional to the Board for
confirmation. On 17.th April 2017, the Board confirmed Mr. Dhivesh Sharma as the
Resolution Professional of New Age (under CIRP).

(Please identify the key issues at this stage)

In the meantime, the RP received a notice from the lessor with regards to the guesthouse
of New Age and its lease coming to end. In terms of the lease renewal for next three years
can be done subject to 30% increase of rent of the said guesthouse. However, the
Resolution Professional chose not to renew the lease and terminate the lease w.e.f. 31st
March 2017 i.e. prior to the termination date. New Age filed an application before NCLT.

(Please identify the key issues at this stage)

Pursuant to the first COC meeting, RP received a letter from Mr. Chew John informing
AFB Investments Pte had initiated insolvency proceedings against THSPL in Singapore
in which he has been appointed as office holder. THSPL had defaulted in making
payment of debt to AFB. Mr. Chew John requested the RP to put on hold any further
action in the New Age insolvency proceedings claiming that since subsidiary company is

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in insolvency proceedings and it was based in Singapore, Singapore would be considered
as centre of main interest. RP replied to Mr. Chew John stating that since he was the
office holder in New Age proceedings, the holding company of THSPL, the centre of main
interest would be in India. Mr. Chew Hohn moved an application before NCLT for
recognition of Singapore proceedings.

(Please identify the key issues at this stage)

Mr. Dhivesh Sharma, RP thereafter collected the information and prepared the
Information Memorandum (IM) and invited expression of interest for Resolution Plan.
Pursuant thereto, The Blue Plaza, a Thailand based hotel requested the RP for a copy of
the IM. In addition, JKL Pvt. Ltd the fourth largest manufacturer of solar panels in India
also requested the RP for a copy of the IM. The promoters of New Age also requested the
RP for a copy of the IM.

RP refused to provide IM to JKL Pvt. Ltd and provided a copy of IM to both the promoters
of New Age and The Blue Plaza. JKL filed an application before NCLT to seek a copy of IM.
(Please identify the key issues at this stage)

Thereafter, the promoters of New Age and The Blue Plaza submitted a resolution plan,
each which is detailed as under:

PLAN SUBMITTED BY NEW AGE:

(i) Sale of “New Age House” property in Jaipur;

(ii) Proposal to the lenders for reduction/hair-cut by 45% in the amount payable
to the lenders with 10 years repayment schedule.
(iii) Payment to Operational Creditors within three years.
(iv) Sale of part of share of New Age in Seven Points Hotel at Raipur;

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PLAN SUBMITTED BY THE BLUE PLAZA:
The Blue Plaza will purchase the Jaipur, Raipur and Singapore hotel for an amount of 125
million USD

On 20th July 2017, RP received claim from PEG Developers Ltd to the tune of Rs. 15 crore.
(Please identify the key issues at this stage)

During the Creditors Committee meeting held on 01st August 2017, certain objections
were raised with regards to modification of the resolution plan with regards to reduction
in the amount payable to the creditors.

In the COC meeting held on 28th September 2017, the plan was approved with
modifications and accordingly, RP filed the plan with NCLT.

NCLT vide its order dated 05th October 2017 approved the Resolution Plan.

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